Rent increases are a normal part of any tenancy, but they’re not always welcomed by the tenant. Here’s what to do if your tenant wants to leave because of a rent increase.

Rent increases are a natural part of any tenancy, ensuring that all costs are covered and the asking price is on par with the rest of the market. So what do you do when a tenant wants to leave as the result of a proposed increase to their rent?

We’ve outlined the steps to take if your tenant wants to leave the property and how to avoid this in the future.

Step 1: Review The Proposed Rental Increase Against The Market

Before deciding on a rent increase, all landlords should evaluate the market to determine if an increase is warranted and what an appropriate increase amount might be. Completing this due diligence in advance is essential in minimising the chances of your tenant leaving the property, as you can be confident that the increase is fair and competitive.

But if you still have a tenant wanting to end their rental agreement because of the higher rent, it can be a good time to take another look at the market with your property manager. If your proposed increased was on the higher side of the range, consider offering a lower rate if it means keeping your tenant long-term.

Good communication with your tenant is essential in explaining the reason behind the increase, so make sure you’re working with a property manager who understands the importance of good relationships and can communicate well. You may find that a tenant who understands the increase in the context of the broader market is less likely to move if the price difference is small. It’s often about the right timing, explaining the proposed increase properly and raising it with your tenant in the right way. A good property manager can guide you.

Step 2: Think About Demand And Vacancy Rates

A rental increase might be important in helping you cover your costs, but if the property stays vacant for a few weeks while you try to find a new tenant, you might lose more money in rent than you would have gained from the increase. In a market with high vacancy rates, it can sometimes be worth allowing your tenant to stay on the original rate.

If there’s a lot of demand in your area and your asking price is fair, you might fill the vacancy quickly at the higher price, which can be a better result than retaining your existing tenant.

This can be a real balancing act, so making the right decision relies on excellent knowledge of the market. A great local property manager is invaluable, as they’ll know how long it might take to find a new tenant in your area and can provide expert advice on how to proceed.

Step 3: Consider If It’s Worth Keeping Your Tenant

A good property manager will find the best tenant through a rigorous application process, but it is still possible for the tenant to be less than desirable. As we wrote about in The Qualities To Look For In A Good Tenant, a bad tenant can affect how well your property is cared for and therefore how it retains its value over time. If your tenant isn’t caring for the property or alerting the property manager to any maintenance issues, it might be better to let them leave so you can find a better tenant and protect your most valuable asset.

On the other hand, if you have a reliable tenant who pays rent on time and looks after the property, it can be worth negotiating with them on a lower rental increase or keeping the original rent, especially if it means they’ll sign on for another 12 months.

Your property manager can advise on the best way forward, based on their knowledge of the market and your specific tenant.

Step 4: How To Minimise The Risk Of Your Tenant Vacating

As we said in our previous article on increasing rent on your investment property, tenants will be much more likely to accept a rent increase if the tenancy has been smooth, including great communication and prompt maintenance from the property manager. This approach is essential for building strong relationships throughout the entire tenancy, instead of just dealing with a problem when you want to increase the rent.